Section 115BAA: All Special Provisions relating to Rate of Income-Tax on Income of Certain Domestic Companies are described below:
(1) [Section 115BAA (1)]: Rate of income-tax in case of a domestic company
Notwithstanding anything contained in this Act but subject to the provisions of Chapter XII (other than those mentioned under section 115BA and section 115BAB), the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after 1.4.2020, shall, at the option of such person, be computed at the rate of 22%, if the conditions contained in section 115BAA(2) are satisfied.
(1A) Option exercised for section 115BAA to become invalid if the conditions contained in section 115BAA (2) are not satisfied [Proviso to section 115BAA (1)]
Where the person fails to satisfy the conditions contained in section 115BAA (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.
(2) [Section 115BAA (2)]: Specified conditions for opting provisions of section 115BAA (1)
The total income of the company shall be computed—
(i) without any—
— deduction under the provisions of section 10AA (relating to special economic zone), or
— benefit of accelerated depreciation/additional depreciation under section 32(1)(iia), or
— benefit of investment allowance under section 32AD, or
— deduction under section 33AB (relating to tea/coffee/rubber development account), or
— deduction under section 33ABA (relating to site restoration fund), or
— deduction under section 35(1)(ii) (relating to any sum paid to certain research associations or to a university, college or other institution to be used for scientific research),
— deduction under section 35(1)(iia) (relating to any sum paid to a company to be used by it for scientific research),
— deduction under section 35(1)(iii) (relating to any sum paid to certain research associations or to a university, college or other institution to be used for research in social science or statistical research),
— deduction under section 35(2AA) (relating to any sum paid to a National Laboratory or a University or an Indian Institute of Technology or a specified person to be used for scientific research undertaken under an approved programme,
— deduction under section 35(2AB) (relating to any expenditure incurred on in-house scientific research and development facility (not being expenditure in the nature of cost of any land or building) by a company engaged in the business of bio technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule,
— deduction under section 35AD (relating to deduction on account of capital expenditure on specified business), or
— deduction under section 35CCC (relating to agricultural extension project), or
— deduction under section 35CCD (relating to skill development project), or
— deduction under any provisions of Chapter Vt-A tinder the heading “C i.e. — Deductions in respect of certain incomes”
W.e.f. A.Y. 2021-22, no deduction under Chapter VIA except deduction u/s. 80JJAA and 80M will be allowed.
(ii) without set off of any loss carried forward or depreciation from any earlier assessment year if such loss or depreciation is attributable to any of the deductions referred to in sub-clause (1) above (See also section 115BAA (3) below);
(iii) Without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i) above; and
(iv) by claiming the depreciation, if any, under any provisions of section 32, (other than additional depreciation under section 32(1)(iia)), determined in such manner as may be prescribed.
(3) [Section 115BAA (3)]: Loss and depreciation referred to in clause (ii) and clause (iii) above shall be deemed to have been already given full effect to
The loss and depreciation referred to in clause (ii) and clause (iii) above shall be deemed to have been already given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.
(3A) Adjustment to the written down value of the relevant block to be made if the effect of depreciation allowance has not been given full effect to prior to the assessment year 2020-21 [Proviso to section 115BAA(3)]
Where there is a depreciation allowance in respect of a block of assets which has not been given full effect to prior to the assessment year 2020-21, corresponding adjustment shall be made to the written down value of such block of assets as on 1.4.2019 in the prescribed manner, if the option under section 115BAA (5) is exercised for a previous year relevant to the assessment year beginning on 1.4.2020.
(4) [Section 115BAA (4)]: Conditions contained in section 115BAA (2) above to be modified to the extent the deduction under section 80LA is available to such Unit
In case of a person, having a Unit in the International Financial Services Centre, as referred to in section 80LA (1A), which has exercised option under section 115BAA (5), the conditions contained in section 115BAA (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.
(5) [Section 115BAA (5)]: Assessee to opt for section 115BAA in the prescribed manner before the specified date
Nothing contained in section 115BAA shall apply unless the option is exercised by the person in the prescribed manner (See Rule 21 AE below and Form No. 104C) on or before the due date specified under section 139(1) for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after 1.4.2020 and such option once exercised shall apply to subsequent assessment years.
[Rule 21AE] : Exercise of option under sub-section (5) of section 115BAA
(1) The option to be exercised in accordance with the provisions of section II5BAA (5) by a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after 1.4.2020, shall be in Form No. 10-IC.
(2) The option in Form No. 10-IC shall be furnished electronically either under digital signature or electronic verification code.
(3) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall—
(i) specify the procedure for filing of Form No. 10-IC;
(ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in rule 21AE (2), for verification of the person furnishing the said Form; and
(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.
(5A) Person may exercise the option under this section (i.e., section 115BAA) if certain conditions of section 115BAB are violated [First proviso to section 115BAA (5)]
In case of a person, where the option exercised by it under section 115BAB has been rendered invalid due to violation of conditions contained in—
— sub-clause (ii) (relating to machinery or plant previously used for any purpose) or sub- clause (iii) (relating to building previously used as a hotel or convention centre) of clause (a) of section 115BAB (2) or
— clause (b) (relating to company engaged in any business other than the business of manufacture of production, etc.) of section 115BAB (2),
such person may exercise option under this section (i.e., section 115BAA):
(5B) Option for section 115BAA once exercised cannot be subsequently withdrawn [Second proviso to section 115BAA (5)]
Once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
(6) [Section 115JAA (8)]: Provisions of section 115JAA not to apply if a person exercises the option under section 115BAA
The provisions of section 115JAA (relating to allowability of brought forward MAT credit) shall not apply to a person who has exercised the option under section 115BAA.
(7) Surcharge on income-tax on total income computed under section 115BAA
In respect of any income chargeable to tax under section 115BAA of the Income-tax Act, the tax computed shall be increased by a surcharge, for the purposes of the Union, calculated at the rate of 10%.
Health and Education Cess (H & EC):
Further H&EC @ 4% shall be levied on the total tax (including surcharge) payable by the assessee.
Hence, the tax payable by such company shall be 25.168 % (i.e. 22% + 10% + 4%)
| 1. If the company opts to be taxed under section 115BAA, the provisions of MAT are not applicable in its case. [Section 115JB(5A) (ii)]
2. Option for section 115BAA can be exercised at any time
As there is no time line within which option under section 115BAA can be exercised, it may be noted that a domestic company having credit of’ MAT may, if it so desires, exercise the option after utilizing the said credit against the regular tax payable under the taxation regime existing prior to promulgation of the Taxation Laws (Amendment) Ordinance, 2019. |
